- Pinterest Inc. s pursuit of PayPal Holdings Inc. would be a giant leap away from its longtime image as a mere online checkout button.
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For months, PayPal has been touting its ambitions to become the next global super app, akin to China s Alipay and WeChat, India s Paytm or Singapore s Grab - digital ecosystems that blend social media, commerce and banking.
The firm, which recently launched a high-yield savings account and shopping features, is now said to be weighing a $45 billion acquisition of Pinterest - a visual search and scrapbooking platform that lets users save, collect and group images by theme.
We see how it can make sense for the company, Sanjay Sakhrani, an analyst at Keefe Bruyette Woods, said in a note to clients. We could see how Pinterest could enhance engagement between consumers and merchants with PayPal being a central facilitator in the commerce journey, thereby feeding into the company s vision of being a super app. PayPal, founded in 1998 by a group that included Peter Thiel and Elon Musk, got its start as a way to pay for things online at a time when many consumers were still relying on paper checks or cash to conduct e-commerce. Since then, the company has more than 400 million users and its checkout button remains one of the most popular for online merchants to add to their websites.
With Pinterest, PayPal could glean even more data about the products consumers are actually buying and potentially advertise or offer discounts based on that data. That would mark a sea change for the payments industry: usually companies that facilitate purchases don t actually know what items a consumer is buying.
It is difficult to link specific consumers to specific purchases, Barclays Plc analyst Ramsey El-Assal said in a note. Payments companies stand in a unique position to move into advertising given rich transaction data that illuminates consumer preferences and habits. It is important to note that visibility on personal identifiable, product-level transaction data is somewhat uncommon in the payments value chain. Under Schulman, who took the company public in 2015 after it was spun off from EBay Inc. PayPal s stock has soared more than 600%. More recently, however, the firm s results have been hindered by the fact that PayPal is moving payments off its platform faster than EBay originally anticipated.
Despite the headwind, the payments giant has been adamant that it still expects to add as many as 55 million active users this year. For analysts, the question with the Pinterest deal, then, has become how many net new users will the social media company actually give PayPal?
Pinterest has over 450 million monthly active users. This compares to PayPal's 400 million active accounts, Mizuho Securities USA analyst Dan Dolev said in a note to clients. While this is a positive, the key debate will surround the degree of user overlap between PayPal and Pinterest. High overlap is likely to result in less upside potential to cross-sell. See also: PayPal CEO s Wealth Surges to $3.8 Billion on Pinterest Talks.
PayPal has gone on an acquisition spree to achieve its broader ambitions. Last year, it paid $4 billion for couponing and price comparison app Honey Science, gaining access to valuable data on consumer buying habits through what was then its largest-ever deal.
Shares of PayPal tumbled 4.9% to close at $258.36 Wednesday after Bloomberg reported on its interest in Pinterest. The stock gained 10% this year, trailing the 21% advance for the 75 - company S&P 500 Information Technology Index.
Harshita Rawat, an analyst at Sanford C. Bernstein Co. said she isn t convinced about the merits of PayPal s approach, noting that it took the company almost two years to integrate Honey s offerings into its own.
One can argue that if PayPal solves commerce via Honey and Pinterest along with financial services which it is trying to do with their new app rollout PayPal will be unassailable in its super-app quest. Rawat is, however, cautious. Rawat wrote a note to clients. PayPal, in our view, has a very mixed track record of deals. How do Donald Trump, Elon Musk, and Gwyneth Paltrow Short-Circuit Your Ability to Think Rationally?
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